As you’ve noticed, we’re not the least bit shy in expressing our concerns over the potential for an increase in protectionism between us and our trading partners. Listening this morning to Fed Chairman Powell’s post-meeting press conference, he had to field a few questions on the topic.

As have all of his predecessors, Mr. Powell refused to weigh in on how the committee feels about virtually anything regarding government fiscal policy (make no mistake, however, they have their concerns about the present trade situation).


He essentially echoed what we’ve been stating herein; that the U.S. economy is presently in very good (he said “great”) shape — which has inspired the Fed to raise its guidance to 4 hikes this year, versus the previous consensus on 3 (that would be the increased hawkishness we anticipated in our earlier post). When pressed, he stated that they’re not yet seeing any adverse effects of newly issued or threatened tariff actions in the data, but that they are indeed hearing serious rumblings from the business community. He mentioned that companies are reporting real concerns, with some threatening course changes, around business investment plans going forward, in the face of a potential global trade war. Which is precisely what we’ve been reading and reporting on herein in the various surveys.


Bottom line: The Fed has to approach the business of monetary policy the same way we have to approach the business of managing client portfolios: That is, take note of the noise, be on constant lookout for serious cracks in the general setup, and stay the course (in the face of the noise and the volatility) until the weight of the evidence demands otherwise. If the Administration soon finds its way to abandoning its present push toward protectionism, no harm done. If it persists, however, I suspect we, and the Fed, will ultimately be singing a less optimistic tune sooner than we otherwise would have, as the data will surely begin to reflect the unavoidable adverse consequences of hindered global trade. 


We’ll keep you posted…